How many ways can the USAF screw up KC-X?

Defense News has this story about the USAF sending Boeing and EADS proprietary information about each company’s bids to the other by mistake.

How else can the government screw this competition up?

If you read the post carefully, the USAF also acknowledges for the first time what we have been saying for quite a while: the award will slip to early next year.

Update: It gets worse. Dominic Gates of The Seattle Times said the information including pricing data from each company, which is key in what is a price shoot-out competition.

This could have serious ramifications.

There is something called Final Proposal Revision, or FPR (pronounced “fipper”). This is a point in the procurement evaluation process by which offerors may change some critical specifications based upon Air Force questions (via “evaluation notices,” or “ENs”) to meet requirements or correct perceived deficiencies.

The fipper is the date (not yet set) at which EADS and Boeing can make their best and final offer, including adjusting the price. IF either company looked at the other’s pricing, this FIP date provides each with the opportunity to out-price the other with proprietary knowledge.

This could upset the entire procurement competition–again.

30 Comments on “How many ways can the USAF screw up KC-X?

  1. Never attribute a conspiracy to what can be explained by mistake or incompetence

    we are from the Government- here to help you

    And you want these people to run healthcare, and the latest government approved groping ?

  2. Ohhh Lord 🙂
    Well at least EADS has got its wish. Following the first round they were saying that Boeing got it’s pricing information and they wanted the same in return. USAF duly obliged 🙂

  3. They mailed the tech assessments to the competitors! Oh boy…this ain’t good. As I recall, these could (and usually did) include price data. This could have serious ramifications down the line….

  4. I just saw the link to the Dominic Gates article. If proprietary data WRT pricing was disclosed, one simply can NOT rule out a protest or subsequent civil action, by the losing bidder.

    This may have irreparably tainted the solicitation.

    • conspiracy theorist would point out that this was deliberatly done to pressure parties into a split buy to avoid a protest xD

      this tanker program has the best entertainment value ever 🙂

      • Split buy? If I were a conspiracy theorist, I’d maintain they did it to set the stage for a request for a sole source. 🙂

        However, I agree that this is likely a mistake–a (expletive deleted) HUGE mistake that has the potential to deep six this competition, but a mistake nonetheless.

  5. Are you sure that this was a mistake…

    What is the best way to come to a split contract ?

  6. Ah JD, the flaw in your comment is that everything in the Benny hill series when that music was playing happened at twice normal speed.
    Alas, not so with the tanker programme!

    Is it time to turn full circle and seek a lessor?

    Quite sure Halliburton or some equally impartial group could make an offer too good to refuse??

  7. WIll be watching out for the marketing coming from the two camps, may reveal some of the information they recieved, talking up their plus points and talking round their weaknesses.

  8. Well, it seems the USAF just provided the looser in this compitition enough information to protest the award to the GAO.

    Let alone this “clerical error” may have violated the law.

    The USAF has no choice now. The only thing they can do is to cancel this round of the KC-X program, then pay Boeing and EADS for their services in putting together each bid.

    I believe that in a legal sense, this round is dead. It no longer matters if this actually was a honest mistake or intential.

    By cancelling this round, the USAF will now only have the option of reengining and upgrading the stored KC-135Es. If the SecDef allows a new round of the KC-X, the USAF will be out of the contract compitition business, his office will run it. He should also rename the program from KC-X to KC-MAYBE.

    At least both Boeing and EADS have the integrity to inform the USAF of what they did. If both OEMs had not done that, the USAF may not have know about it.

    • Hmmm. Both bidders would get reimbursed for their time and effort put into this competition but in another post, you claim that EADS and NG would not get any compensation for having their contract from the last competition cancelled.
      Interesting logic you have there.

  9. “Shame upon him who thinks evil upon this !”
    Seriously, this was NO mistake.
    I agree with CBL, this was on purpose, as it ideally serves the purpose to reach a contract splitting.
    Besides, it will help to sabotage fulfilment of this contract by EADS.
    Our thanks fly out to the USAF for their duplicity.

  10. I really hate to say this, but maybe just awarding a 70-30% Boeing to Airbus split will put this shameful “procurement” to rest already. That will avoid another protest, of which the losing bidder already has powerful ammunition, and perhaps will convince Airbus that it can’t use U.S. taxpayer money to subsidize building it’s factory in Alabama. Time to put up or shut up…

    My biggest concern is that procurement will be taken away from the Air Force – Permanently – And will be given to the pinheads in Office of the Secretary of Defense….

    • 70%-30% split?! On what factors do you base this split?
      I am certain you put a great deal of analysis into this one.

      “and perhaps will convince Airbus that it can’t use U.S. taxpayer money to subsidize building it’s factory in Alabama.”

      Sorry, can’t find your logic on that one either.

  11. Is it possible that this was done to insure that the competition would be as competitive as possible and would result in the lowest cost possible?

    Or, is this a really stupid error that will create continued basis for delays and protests.

    It is so inconceiveable that a mistake like this could happen that I tend to think there is some methoid to this madness

  12. I would think that the AF now cannot ask for any revised pricing on the areas of the RFP that was disclosed. If they do, the loser has a sure protest. It must be assumed that the mis-sent information was reviewed by the other party. It could even be a trap in that any of this data is “used” by the other bidder they could have a violation.

    It may have killed any ability to request a best and final.

  13. The US should split their tanker needs in half. One half is “strategic” and – for reasons of national security – is legitimately(!) contracted to the homeland bidder. The other half is considered “non-strategic” and is pooled with allies. The strategic contract is outright acquisition, the non-strategic contract is leasing. As the majority of the allies is European, their legitimate choice would be Airbus.
    Then time will simply tell which fleet is more effcient. And in case the Boeing model turns out to be less efficient, well – the strategic aspect may well be worth it.

  14. Curious :
    Is it possible that this was done to insure that the competition would be as competitive as possible and would result in the lowest cost possible?

    A competition is meant to create tension. As the competitors do not know about each others bidding, they try to outbid each other. If bidders get to know each other’s bid prematurely, this works like a short circuit. The result is, that there is know tension anymore, i. e. no competition.

  15. Correction: The last sentence should read “The result is, that there is no tension anymore, i. e. no competition”.

  16. its — its deja view all over again !! Only this time its an ” accident”

    —“The Department of Defense is investigating allegations that Druyun may have provided secret Airbus pricing information to Boeing. Boeing, in a statement, denied any infraction. “We believe we never received any proprietary information from any official on any subject throughout the (tanker) negotiation process,” the company said.” —

    –This set the stage for another bit of intrigue: On July 1, Air Force official Darleen Druyun told Boeing “several times” that the price of the Airbus was $5 million to $17 million less than Boeing’s 767. Investigators with the Senate Commerce committee now want to know if the disclosure of Airbus’s price to Boeing was improper; the committee has provided documents it obtained from Boeing to the Pentagon’s inspector general. —-

    +++++
    http://www.pogo.org/p/contracts/ca-030103-c17.html
    January 6, 2003

    The Pentagon’s Self-Proclaimed “Godmother of the C-17”
    Takes a Top Position with the Aircraft’s Manufacturer
    FOR IMMEDIATE RELEASE
    Contact: Eric Miller (202) 347-1122 defense@pogo.org

    Darleen A. Druyun, the former top acquisition official at the U.S. Air Force who publicly pushed a controversial proposal with The Boeing Company in 2000 to redirect the Pentagon’s acquisition of the C-17 cargo aircraft to a more “commercial-like environment,” has accepted an executive position with the defense contractor.

    Druyun, who has referred to herself as the “Godmother of the C-17,” will lead Boeing’s missile defense business headquartered in Washington D.C., Boeing announced on January 3, 2003.

    Danielle Brian, POGO’s Executive Director, dubbed Druyun’s hiring by Boeing Missile Defense Systems as one of the most egregious examples in recent memory of the revolving door between the federal government and defense contractors.

    “Ms. Druyun is now officially an employee of the company whose interests she so ardently championed while she was supposedly representing the interests of the taxpayers,” Brian said.

    While at the U.S. Air Force, Druyun was a staunch supporter of the December 2000 proposal to acquire additional C-17 cargo aircraft while sidestepping financial oversight for Boeing. The proposal would have made the airlift plane a “commercial item.” While the acquisition proposal would have been a financial bonanza for Boeing, it would have ultimately put billions of taxpayer dollars at risk.

    However, a POGO investigation and subsequent report “Heavy Lifting for Boeing: Sweetheart Deal Helps Defense Contractor & Hurts Taxpayers,” shed light on this now dead boondoggle.

    POGO’s report was featured in a New York Times front-page story that caused Defense Secretary Donald Rumsfeld to formally request an explanation from the Air Force. The proposal also was the subject of an investigation by the Department of Defense Inspector General and drew criticism from some Congressional leaders. Although the plan would have provided little or no benefit for the taxpayers, at the time a Boeing news release quoted Druyun as saying the “program is very appealing to all parties involved: the Air Force, the commercial operators, the manufacturers and the American taxpayer.”

    The Project On Government Oversight investigates, exposes, and seeks to remedy systemic abuses of power, mismanagement, and subservience by the federal government to powerful special interests. Founded in 1981, POGO is a politically independent, nonprofit watchdog that strives to promote a government that is accountable to the citizenry.

  17. Sorry if I seem jaded by saying this but I do not believe that these companies did not look at (and copy) this information. Worse still, nobody will ever be able to prove it one way or another. OK, if someone on the inside of either company blows the whistle or carelessly leaves a company lying around in the open!!

    It will be interesting to see how they do resolve this one. The only thing most seem to universally agree on, is that contrary to this spokesmens assertions, this competition cannot just continue on without any changes, as if nothing had happend.

    If everybody agrees that the loser would have a case for protesting, it would stand to reason that such a protest would be upheld. Continuing on with said competition as is would hence be a blatant waste of taxpayer’s money not to mention of government resources.

  18. Aero Ninja :
    70%-30% split?! On what factors do you base this split?
    I am certain you put a great deal of analysis into this one.
    “and perhaps will convince Airbus that it can’t use U.S. taxpayer money to subsidize building it’s factory in Alabama.”
    Sorry, can’t find your logic on that one either.

    Because Boeing is the U.S. manufacturer, and, as I said, both designs are excellent with advantages and disadvantages. And Airbus has already said they will not build a factory in Alabama if they don’t win the KC-X competition. Exactly what is it that I’ve said that isn’t clear? Just because you may not agree with my OPINION, doesn’t change the facts.
    It seems to me that you don’t want to follow my logic. And that isn’t my problem, is it?

    • Boeing, the US manufacturer with major work packages for the 767 being done in Japan and Italy. What a coincidence? To date, the only 2 countries to have purchased the 767 based tanker.

      As for EADS, I believe the logic is more along the lines of it isn’t cost effective to build the facility in the US without the orders for the KC-X. i.e. Building a facility only for freighters Furthermore, if they were to win the competition, there is no government money from the US being handed out to build said facility so why do you intimate such a thing?

      • Wait, wait… government money won’t be directly or indirectly financing the construction of said facility in Alabama… Is that what you are saying?
        Oh Lord!
        It’s called profits. They anticipate profits, as most companies do, and from those profits, an “investment” is made. Those profits will come from monies paid by the Pentagon, i.e. from the U.S. taxpayer. See the logic now?

        Oh brother! I’m so glad decided to stay in accounting. Blogging can be very frustrating at times. 🙂

        • Well Joanne, I may not be a business expert nor an accounting expert but I have always been told there is a difference between an “investment” made in order to gain profits and an outright “subsidy”, where money is given to a company without getting anything, or getting much less than one should normally get, in return (sort of like the original tanker lease deal).
          I don’t see Airbus getting (serious) money from the USAF in advance of any aircraft deliveries, so they will be biulding this facility in Alabama with their own funds, in the hope of making a profit downstream (since it is already on record that this does not interest you, we can leave it at that). If one uses profits to invest in something, how is that a subsidy?
          Based on your “logic”, whoever wins this competition is really getting a subsidy. And to further expand on this topic, that would mean that any money spent by the US Government, on anything, is really a subsidy, as it is coming from the US taxpayer?!

  19. US Govt. sending contractors competition sensitive data of competitors is fairly common. Most US contractors have processes in place to protect them from receiving inappropriate data. Personnel seeing the data are disqualified from participating in the competition, so it’s in the contractor’s interest to protect those people. If the data is intentionally distributed, then the contractor has the likely hood of being disqualified from the competition.

    The data transmission mistake is always found, so there is no upside of using the data. Best alternative is treat it like anthrax and contain the damage.

  20. Aero Ninja :
    Well Joanne, I may not be a business expert nor an accounting expert but I have always been told there is a difference between an “investment” made in order to gain profits and an outright “subsidy”, where money is given to a company without getting anything, or getting much less than one should normally get, in return (sort of like the original tanker lease deal).
    I don’t see Airbus getting (serious) money from the USAF in advance of any aircraft deliveries, so they will be biulding this facility in Alabama with their own funds, in the hope of making a profit downstream (since it is already on record that this does not interest you, we can leave it at that). If one uses profits to invest in something, how is that a subsidy?
    Based on your “logic”, whoever wins this competition is really getting a subsidy. And to further expand on this topic, that would mean that any money spent by the US Government, on anything, is really a subsidy, as it is coming from the US taxpayer?!

    So then I hope they listen to your “logic” see where they are going to make money and bow out of this so-called competition. Really Ninja, I hope they see things your way…

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